exchange of cash and RMBS as
a secured loan, but said it was
unlikely that a court would
allow it.
“However, the possibility of
such re-characterisation cannot
be ruled out entirely because
the structure of the bonds is
new to the market and, as such,
there is no applicable judicial
precedent,” SMBC wrote in its
prospectus.
A structured finance
banker in Asia questioned
whether European covered
bond investors would buy the
paper, considering the unique
features.
“They may find it does not
fit into the European covered
bond narrative in terms of
uniformity and equivalence,”
said the banker. “This looks like
ABS squared.”
He noted that some smaller
French banks have in the past
included RMBS in their covered
pools, but typically no more
than 10% of the value, while
Korea also allows issuers to
include RMBS, though none
have done so yet. European
issuers have been removing
RMBS from their covered bond
pools in recent years, due to
changes in legislation.
“If they miss the covered
bond investors, the next
question is whether this is
HQLA eligible,” added the
structured finance banker in
a reference to high quality
liquid assets. “If it is, then bank
treasuries can buy it. If it isn’t,
then it becomes a relative value
trade.”
The unusual structure
brought back memories of
what was purported to be the
first Chinese covered bond.
In 2016, Bank of China sold
US$500m of three-year bonds
secured with a pledge against a
portfolio of onshore bonds. BOC
called the securities covered
bonds, but Moody’s referred to
them as secured notes.
Due to the lack of domestic
legal framework, Japanese
banks do not issue such
instruments onshore. “Banks do
RMBS instead, but they have to
pay up,” said a Japanese DCM
banker.
Bankers speculated whether
the deal would price closer
to covered bonds or senior
unsecured debt. They said
the most natural pricing
comparables in the covered
bond market are issues from
Singapore and Australia. Yancoal objects
to Noble plan
Restructuring Australian miner with legal claims raises
objectionsBY DANIEL STANTONNOBLE GROUP is facing opposition
from Chinese-controlled miner
YANCOAL AUSTRALIA as the embattled
commodities trader tries to
complete its debt restructuring,
adding another chapter to the
history of bad blood between the
two companies.
With Noble set to seek
court permission, last Friday in
London and on October 15 in
Bermuda, to convene so-called
restructuring schemes, Yancoal
and certain of its affiliates have
objected to the procedure, the
proposed classes of creditors and
the jurisdiction of the English
courts, Noble said in a filing to
the Singapore Exchange.
Noble said Yancoal was
classified as a potential “other
scheme creditor” under its plan,
a category that includes parties
pursuing breach of contract,
tort claims and other contingent
claims.
Yancoal commenced
arbitration proceedings against
Noble in May this year seeking
relief, including damages,
because it claimed Noble had
failed to purchase coal between
2015 and 2017 under an existing
contract.
Gloucester Coal, a subsidiary
of Yancoal following a merger
between the two in 2012, has a
marketing services agreement
with Noble, running until
December 31 2040, under which
Gloucester makes payments
based on how much coal it sells.
Yancoal said that the transaction
amounts had been below the
threshold stipulated in the
agreement and so Gloucester had
not incurred any fees.
Yancoal said in the prospectus
for its planned dual primary
listing in Hong Kong that
arbitration proceedings
were at an early stage. It has
claimed damages of US$35.7m.
Noble referred to the Londonarbitration proceedings in its
restructuring circular and said it
intended to “vigorously defend”
the claim.
Separately, on August 3,
Noble commenced proceedings
in the Supreme Court of New
South Wales to try to terminate
a marketing services contract,
claiming an allegedly unpaid
marketing fee for 2014, damages
for losses said to arise from
alleged breaches of the contract
from 2015-2017, and damages
for the alleged repudiation of the
contract by Gloucester Coal.
Yancoal said Noble is claiming
US$172.5m in losses and
damages, covering the period
from 2018 to 2040. Yancoal
said it and Gloucester Coal
would “vigorously defend” the
proceedings.
Yancoal said that Noble was
one of its biggest customers
by revenue in the past three
years, but the current coal sales
contract between the two is due
to expire in December.
Shanghai-listed Chinese coal
giant Yanzhou Coal Mining
currently owns 65.5% of Yancoal.
Eight years ago, Noble owned
an 87.7% stake in Australia’s
Gloucester Coal. That was diluted
in an equity raising that year,
then in 2012 Gloucester and
Yancoal agreed a merger that
gave Noble a 13.2% stake in the
enlarged Yancoal entity, plus cash.
China’s Yanzhou Coal Mining
held a 78% stake in Yancoal
following the merger, but then
conducted a heavily dilutive
A$2.5bn (US$1.8bn) stock offering
last year to fund the acquisition of
assets from Rio Tinto.
Noble and another minority
shareholder objected to
Australia’s Takeovers Panel, but
they were unsuccessful. Not
only was Noble’s stake diluted,
but it was forced to recognise
a US$258m writedown on the
value of its Yancoal shareholding
after the transaction. For daily news stories
visit http://www.ifrasia.comfrom China Evergrande Group.
BOC International said in a
report that it expects offshore
bond supply pressure from
Chinese developers to persist
into the fourth quarter, given
that many developers have
unused offshore issuance
quotas from the National
Development and Reform
Commission.
Moreover, BOCI said the
property market is not
expected to see a reversal of
regulatory tightening measures
this year despite the escalating
tensions between China and
the US.
“We continue to expect
tailored property policies
in different cities with
restrictions on purchases,
mortgages, price, and sales,”
it said.
According to Nomura,
Shimao had US$820m from its
offshore debt issuance quota
that was unused ahead of the
launch of the deal.
Proceeds from the bond
issue will mainly be used to
call the existing US$1.1bn
8.375% 2022s and the
remainder for project capital
expenditure, according to
Nomura. Shimao will also use
part of the US$900m four-
year syndicated loan it raised
recently to call the 2022s.
Shimao’s newly priced
bonds were underwater in
the aftermarket and were
quoted at 99.70/99.90 last
Tuesday morning, according to
Tradeweb.
Goldman Sachs, HSBC and
Morgan Stanley were JGCs as
well as joint bookrunners
and joint lead managers with
CICC, Deutsche Bank, SMBC Nikko,
Standard Chartered Bank and
Bank of East Asia.